Day 3 of my NY Times 7-Day Financial Tuneup is called Find the Best Credit Card for You. (Sign up for your own personalized tune-up for full details.) The key again is to actually apply for a better card, not just think about it and then keep your old card with lukewarm rewards and/or high interest rates.
Scenario 1: Carrying a balance
If you are still working on paying down your credit card balance, the NYT (surprise!) recommends a credit card with a low interest rate and fees. The average credit card interest rate is something like 17% APR, which is simply nuts. Ignore cashback and rewards credit cards, as they have higher interest rates in general that will overwhelm any potential rewards. The NYT specifically mentions the following cards:
- Simmons Bank Platinum Visa has a lower variable APR (currently 9.5%) with no balance transfer. This might be a better solution if you plan on carrying a balance forever (why?!?).
- Discover it Secured credit card improves your credit score (and thus perhaps your interest rates) as it will help build a positive credit history with no annual fee. You can have poor credit as a $200 security deposit is required for a $200 credit line.
If you’re going to apply for a new card, I prefer the following cards with 0% introductory APRs with no balance transfer fee. Here, the plan would be to consolidate balances and design a plan to pay it all off within the promotional period. After that, the rates will shoot back up again unless you do another balance transfer.
- Amex EveryDay from American Express
- Chase Slate
- Navy Federal Credit Union
- BankAmericard
- Alliant Credit Union
Scenario 2: No credit card debt
If you do pay off your balances every month, then you can ignore interest rates and focus on getting points, miles, or cash back on your purchases. The NYT specifically mentions the following cards.
- Citi Double Cash card for simple cash back. It pays “1 percent back when you make the purchase and another 1 percent when you pay the bill. The best part? There’s no need for you to track points or decide when to cash out. The money comes back to you automatically.”
- Bank of America Travel Rewards Card for simple travel rewards with no annual fee.
- Chase Sapphire Preferred for those that collect airline miles and know how to use them efficiently.
Your goal with your new card should be to get all of the rewards you can just for spending as much as you normally would.
I’m giving the NYT an overall thumbs-up on these recommendations for most people. However, I would only recommend the Bank of America Travel Rewards card if you can participate in their Preferred Rewards program and reach the Platinum (2.25% back towards travel) or Platinum Honors (2.62% back towards travel) tiers. Otherwise, the Citi Double Cash is better than 1.5% back.
The hard part: Actually applying for a new card! The reason why there are so many juicy incentives for credit cards is that most people still don’t like to bother with applying for a new card. Change can be hard. If you’ve been thinking about making a switch, let today be the day!
Financial Tuneup Recap (still in progress)
- Day 1: Optimize Your Thinking
- Day 2: Trim Your Budget
- Day 3: Finding Better Credit Cards (this post)
- Day 4: Retirement
- Day 5: Credit Report
- Day 6: Insurance
- Day 7: Emergency Fund
- Alternate Day 6: Flexible Spending Accounts
- Alternate Day 7: Student Loans
The Best Credit Card Bonus Offers – October 2024
Big List of Free Stocks from Brokerage Apps
Best Interest Rates on Cash - October 2024
Free Credit Scores x 3 + Free Credit Monitoring
Best No Fee 0% APR Balance Transfer Offers
Little-Known Cellular Data Plans That Can Save Big Money
How To Haggle Your Cable or Direct TV Bill
Big List of Free Consumer Data Reports (Credit, Rent, Work)
“The best part? There’s no need for you to track points or decide when to cash out. The money comes back to you automatically.”
Not true! You have to wait until you have at least $25 cash back, then cash out manually.
I was wondering about that part, but I haven’t cashed out of my Citi Double Cash in a while. I thought it might be a new feature.
This is what the Citi Double Cash MC FAQ says:
Is there a minimum amount to redeem cash back on my Citi Double Cash Card?
Yes, you must have at least $25 in cash back to redeem for gift cards, checks and statement credits.
Yes, but does it come back automatically once you reach $25? It’s not a big deal to me but, the article seems to suggest it is automatic while I don’t remember ever seeing that feature.
The Ally CC has a similar deal but with just 1% for most purchases (cash back – but at your initiative – when you have at least $25). However, they also add a 10% bonus if you take the cash back as a deposit into an Ally online bank account.
It’s great for me – I direct it into my online savings account. I travel enough for work to desire travel rewards and don’t frequent most of the establishments for the gift cards other CCs offer as cash back.